Investment Advice for Youngsters

Whether it’s saving up for retirement, saving for investing in a business, or saving up for education, youngsters cannot do it properly without guidance and the right knowledge. Most young adults hardly ever even think of retirement. Or they just go with the flow and only worry about survival. Partying away the leftover money seems to be the norm nowadays.

If you are a young adult, it is smart advice that you should think about things like retirement and investment.  Most of you will shy away from these concepts because of difficult words like interest rates and annuities. But running away is never the solution

This article will give young adults advice on saving for the future and guide them on how they can utilize their few assets in a smart way. The term used for this is portfolio management!

Time Is Money! Start Soon

Don’t wait to start saving when you’re in your 40s! You should start as soon as you get a job. Check if your organization offers a retirement plan. If not, find one. Look up the internet for retirement plans and try making an individual retirement account.

Most retirement plans involve contributing monthly. A retirement account will automatically make the contribution for you without the hassle. So you will be secure for good with automatic payments being made in your name through your retirement account. Sure, it’s going to take away a chunk of your salary, but hey, you’ll be thanking us when you’re in your 70s!

Another reason to start early is that youngsters do not have financial obligations like children or a spouse. You are free to spend solely on yourself when you are a young, unmarried adult. So make good use of the moment and start saving up as soon as you can. Invest in financial instruments, or businesses, or retirement plans so you have a good amount of cash when you’re older. No one has the energy to work 2 jobs when they’re 70.

Why am I stressing so much on starting early? Let’s take an example.

Suppose you are 25. And you invest $200 every month. Let’s take a 7% annual interest rate return on that money. So by the time you are 65, you will have $525,000 when you retire.

But if you invest that $200 monthly but at age 35, then for the same 7% annual interest rate, you will only have about $244,000 by the time you are 65.

Diversify Your Portfolio

It is never a good idea to put all your eggs in one basket. Investment is similar to eggs. Only fools would pool all their money into one company or one kind of financial instrument.

The best way is to select stocks from a wide range of market categories. You can do this through an index fund. Try to invest in conservative stocks that will give you regular returns or dividends, or invest in stocks that have long-term growth potential.

You can also choose to invest in a small percentage of stocks that have better returns but higher risk potential. This means that the investment is risky, but if it works out for the better, you’re going to have a good return. Putting in a small percentage will mean you aren’t putting all your belongings at risk.

But if you are planning to invest in individual stocks, my advice would be to not pool in more than 4% of your total investable amount or portfolio into just one stock. This is to minimize the effect of downturns. If one or two suffer losses, you won’t lose a large chunk of your money.

Consistency

Consistency and regularity are the keys to good investment routines. Try to invest regularly and pay your installments every month without delay. If you face hardships like losing money or needing money for an emergency, then you’ll obviously not be able to be regular. But the minute you’re back on your feet, get back into discipline and make up for what you missed.

Always Remember Taxes

Taxes are a regular part of the life of every adult. They just seem to be everywhere. And they are right there in your retirement investment account as well. Always remember to keep taxes in mind before estimating the amount of money you have or will have in the future. Remember taxes everywhere!

Lower Your Costs

If you’re going to be investing through a brokerage firm, be sure to use a discount brokerage firm. Index funds are cheaper and are also a good way to go. Also, since you’re in the business for the long run, don’t go around buying and selling every single day. Keep your costs minimum. Keep the commissions away!

Hopefully, you now have a better idea of what to do with your money and you have a good grasp on the basics of investing. Here is the best place for finding suitable investments for young adults.

Happy investing!